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Nextag CEO Jeffrey Katz is out today in the Wall Street Journal with an opinion piece taking Google to task over a lack of transparency and fairness. Perhaps it’s not the smartest move, given that all his arguments can be neatly turned back against Nextag. Moreover, unlike Google, NexTag is probably in violation of US Federal Trade Commission guidelines on consumer disclosure.

Getting 65% Of Your Traffic From Google Is A Stacked Deck?

Let’s do the dissection. Writes Katz:

At my company, Nextag, a comparison shopping site for products and services, we regularly analyze the level of search traffic we get from Google. It’s easy to see when Google makes changes to its algorithms that effectively punish its competitors, including us.

Our data, which we shared with the Senate Judiciary Committee on Sept. 21, 2011, shows without a doubt that Google has stacked the deck. And as a result, it has shifted from a true search site into a commerce site—a commerce site whose search algorithm favors products and services from Google and those from companies able to spend the most on advertising.

I’ve asked Nextag today to tell me the percentage of traffic it currently receives from Google now and for the past five years, so that we can all understand how Google stacking the deck has harmed the company. All the Nextag people are out for the day, it appears, unfortunately. Two separate PR people assigned to Nextag, when I emailed them, generated “out of the office” messages. The third I was told to email generated an undeliverable response.

No matter, I know that, as late as last year, 65% of Nextag’s traffic comes from Google. That’s what Katz testified to the US Senate.

If Google stacking the deck against a competitor is to send the competitor 65% of all its traffic, I submit that Katz has no idea what stacking the deck really means. Perhaps a trip to Las Vegas would be instructive. I’ve love to walk away with 65% of the money I gamble there.

Postscript:Some people in the comments are somehow getting confused thinking I said that Google send 65% of Google’s traffic to Nextag. That’s not what I wrote, but to clarify, Nextag has stated that it received 65% of Nextag’s traffic from Google. I’ve also change the subhead from “65% Of Traffic From Google Is A Stacked Deck?” to what appears above to perhaps further clarify.

I’m not sure where the other 35% comes from, but for any site to get 65% of its traffic from Google is fairly out-of-the-ordinary. Most sites I know get anywhere from 15% to 35%. They have a balanced stream of visitors, including a set of visitors coming directly to them.

Oh, Nextag Doesn’t Like Paid Inclusion Now?

This is one of my favorite parts:

Most people believe that when they type “convection microwave oven” or “biking shorts” into Google, they will receive a list of the most relevant sites. Not true. That’s how Google used to work. Now, when someone searches for these items, the most prominent results are displayed because companies paid Google for that privilege.

For one, that is how Google still works for the “organic” listings that are part of its main search results. Katz, of course, is glossing over that and potentially libeling Google in the pages of the Wall Street Journal. I’ll leave that for Rupert Murdoch to deal with.

In that post, I explain more about this “paid inclusion” model, though Google is unilaterally trying to redefine what “paid inclusion” means, since years ago, Google said anything that’s paid inclusion is evil. That’s embarrassing for Google, and the whole redefinition thing is going exceptionally bad with me, each time the company tries it.

Most people believe that when they type “convection microwave oven” or “biking shorts” into Nextag, they will receive a list of the most relevant sites. Not true … when someone searches for these items, the most prominent results are displayed because companies paid Nextag for that privilege.

Unlike what Katz said about Google, what I’ve rewritten his words to be about Nextag are true, to the best of my knowledge. That’s because the only way you get listed as a merchant in Nextag is if you pay to be there. But someone searching on Nextag doesn’t know this, because Nextag doesn’t disclose this.

Let’s Play Pin The Tail On The Disclosure

When Google finally makes the switch to paid inclusion with shopping search (it’s not there yet), it will disclose that the listings are paid for with a small “Sponsored” icon as shown at the top right of the box below:

What’s it like at Nextag now, where paid inclusion already operates? Here’s the top of the results:

There’s nothing that tells you that only merchants who paid to appear are showing up. The “Sorted by: Best Match” drop down doesn’t reveal this. Nor does the disclaimer at the bottom of the page, which says:

Nextag makes reasonable efforts to maintain the accuracy of product and pricing information displayed on our site, and we do not guarantee that any information is correct. If pricing or product information listed on the Nextag site is different than pricing or product information on the store’s site, then the information on the store’s site will apply. We encourage users to conduct their own research prior to purchasing. Nextag cannot be held liable for any actions taken based on the product and pricing information provided and Nextag shall not be held responsible for any loss or damage resulting from any business conducted with any company listed at Nextag. Please refer to our Terms of Use for complete details. To report a pricing error, click here.

Nextag can take all that space to inform you that it’s not responsible for anything it lists, errors and so on (despite in the WSJ story spending so much time saying how it’s better than Google), but it can’t spare a few words to note that all of its results are bought and paid for?

2002 Called & Has Some Disclosure Demands

It should. It should because FTC guidelines created in 2002 say that search engines should ensure “the use of paid inclusion is clearly and conspicuously explained and disclosed” and:

The staff recommends that if your search engine uses paid inclusion programs that may distort rankings or placement criteria, you clearly describe how sites are selected for inclusion in your indices. Also, consumers should be able to easily locate your explanation of the paid inclusion program you use, and discern the impact of paid inclusion in search results lists.

I’ve been through the Nextag site three times in the past six months in search of the required disclosure, including last week, and I’ve never found it. I went through it a fourth time today. There’s nothing on the About page:

Expert deal-hunters since 1999, we make it surprisingly easy for you to find everything from tech to travel to tiki torches all at the price, place and moment that’s right for you. Browse, review, share, get the 411, get the deal: with Nextag, you’ll love the way you shop.

30+ million people consult us each month to make their online purchases, and we use our best-in-class search technology and proven expertise to ensure that each and every one of those shoppers is a happy one. This focus and commitment benefits our partners as well, delivering impressive sales volume and ROI for merchants and a streamlined user experience for search providers.

Nextag is a price comparison site where shoppers find great deals on their favorite products. We provide side-by-side comparison of latest prices, including tax and shipping, from a wide variety of sellers and stores. We also provide helpful information on sellers to help shoppers decide where to order from.

Is Nextag a store? Do I purchase products from Nextag directly?

Nextag does not sell anything directly to users. We just provide a service for Internet merchants to list their products for sale on our website. If you want to purchase a product, please contact the merchant directly by clicking on the merchant’s logo or the “Go to Store” button.

Do I get charged to use your service?

No, Nextag is 100% free for buyers.

After A Week, Still Waiting For Nextag To Research Disclosure

If I’ve missed the disclosure, it’s not for a lack of asking about it. Nextag’s PR firm emailed me last week, the day my Google Shopping story appeared, asking:

Just wondering if you were interested to get Nextag CEO or CMO’s take on Google Shopping and the new developments there.

My response:

Sure, if you wanted to send a statement along, be happy to look.

I’d also like to understand how Nextag is doing disclosure to consumers about paid inclusion within its own results. I’ve been to the site to check on this three times in the past six months, including yesterday. Each time, I come away finding no disclosure, which would be in violation of the FTC’s guidelines. Am I somehow missing this?

I was told that the firm would “get you more clarity on that.” Apparently, there wasn’t time to clarify if Nextag was in violation of FTC guidelines but there was time to likely help coordinate a WSJ opinion piece attacking Google on transparency.

Transparency Is As Transparency Does

Katz goes on with some suggestions for the European Union, which has given Google until July 2 to response to its anti-trust concerns.

First, Google needs to be transparent about how its search engine operates. Today Google hides behind forked-tongued gobbledygook that is meant to obfuscate. Google should disclose, clearly and in plain English, when advertisers receive better placement in search results and when a result is a Google-owned property. And when a competitor’s service is the best response for the user, Google should highlight it instead of its own service.

For all that Google is made out as a black-box, it discloses a hell of a lot more about how it works than Nextag. Where it shows ads, it does disclose these, as required by FTC guidelines. I’ve never seen a violation here.

As for how Google is supposed to decide if a competitor has better results and highlight those versus Google’s own listings, Google has an algorithm that does that already. Katz doesn’t like how that algorithm works (I guess because anything short of 100% traffic to Nextag isn’t fair), but unless regulators want to step all over freedom-of-speech protections, there are serious issues trying to regulate “relevancy.”

Irony Alert: Please Show Fewer Ads, Send More Free Traffic

Next, Katz suggests:

Second, Google should provide consumers with access to the unbiased search results it was once known for—regardless of which company or organization owns the service. It should also allow users to reduce the number of ads shown or incorporate a user’s preferred services in search results.

There’s a chuckle. Katz would like Google to magically send his company even more traffic than the absurdly high amount that most sites would love to have, all for free — and also, could you reduce those ads that fund the whole thing? And all this from a company that lists no one that doesn’t pay to play? Incredible.

But let’s say Google agrees to this. How about a reverse? Is Nextag going to allow other shopping search results into its search engine, when its search results aren’t the best?

Show Everyone’s Ads

Finally, Katz concludes:

And third, Google should grant all companies equal access to advertising opportunities regardless of whether they are considered a competitor. Given its market share and public commitment to providing users with the most relevant, helpful information, Google has an obligation to provide a level playing field.

Sure, there’s a good argument for that. I suppose you could make the same argument that a dominant newspaper in one city must be required to carry ads from another newspaper, or a dominant TV network should carry ads for another network. Oh, not so easy now? But there might be some anti-trust rules that do require Google to accept ads. Maybe then Bing will be able to run ads on Google. Wait, they already do.

Dear FTC: Wake Up & Enforce Your Existing Guidelines

I’m waiting to hear back from Nextag about how it would actually expect Google to put these recommendations into practice. But I continue to be amazed that a company that gets more than half its traffic from Google protests that it’s being harmed. I continue to be amazed it looks for regulatory relief to get more free traffic when it doesn’t provide free traffic itself. I’m freshly amazed that it now wants to poke at Google about paid inclusion when it seems oblivious to the fact it’s likely violating the FTC guidelines about this itself.

Finally, would anyone else like to see the FTC wake up and actually review the search engines out there in terms of the consumer disclosure they should be doing? I sure would. As I wrote last week:

One thing about the change is that it will probably cause all the shopping search engines out there to better disclose the paid relationships they have. As I covered in my column yesterday, the FTC has seemed to ignore that some don’t have any disclosure at all, as required. Google’s move has the potential to raise the bar here, and that’s sorely needed.

Here’s hoping that happens, or that Nextag proactively starts the ball rolling on the transparency it so desperately seeks.

Postscript: After I finished this, I found Google has posted its own response that you’ll find here pushing back on Nextag claims about Google’s search results, including that its results are biased or that it refuses competitor ads.

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You’re looking at the wrong chart. In terms of traffic (and thus audience), Nextag is ranked fifth, Google second. You’re viewing a chart showing how much revenue advertisers make, where Nextag is the second biggest revenue generator.

But regardless, it is about the consumer. A consumer searching for news on Google is well served if Google provides news results. Otherwise, we’re right back to 9/11, when you’d search on Google and get listings saying “see the view at the top of the World Trade Center.” Having a vertical news search engine as Google News is prevents such terrible results for showing to consumers. The same is true for other search engines.

Google is not the first general purpose search engine to offer vertical search results. It’s a natural evolution of what a good search engine should do. It certainly sucks if you’re a shopping search engine and you have to compete against a search leader like Google that goes into shopping search. But it’s like complaining that you’re a milk vendor that gets upset when Walmart sells milk. It’s a store. People want to buy products. They carry products people want.

Google is a search store. It carries search products. It’s harmful to the consumer to say that it can’t carry search products. If you accept that argument, eventually, you end up with Google being nothing but a place that points to other search engines.

If Nextag is an awesome search engine, then it should have a substantial audience that seeks it directly. Having 65% of your traffic coming from Google suggests otherwise. And if that’s a negative trend, it’s even more damning against Nextag. That suggest it never had a direct audience that was seeking it out but that it was instead depending entirely on another search engine to send its traffic. IE, it’s skilled at SEO bub not as being a high-quality destination search engine that consumers seek out directly.

Finally, the concerns about transparency are not tangential. They are core to what Nextag’s CEO raised, that Google is somehow giving preference to those who paid rather than listing the best results, as consumers may expect.

Those are his words. Go back and read them. Consumers are expecting the best results, not just results from those who pay for the privilege of appearing. But that’s not apparently the case at Nextag. You aren’t getting the best results. You’re getting the best results from those companies that chose to pay. There could be better results, but Nextag doesn’t go out of its way to try and locate those. It only deals with those who pay.

All of the “non-google” ones on the above list either utilize referral links which come with affiliate payment on conversions or some kind of cpc model. With the exception of shopping.com (an ebay site-which puts fine print on individual listings), none of them disclose anywhere that I could see that they get paid for referring converting customers to these sites except on the merchant sign up page.

And then of course there’s everybody’s new favorite Pinterest who uses referral links or allows “pinners” to include them.

unprogram

(This is in reply to your later post in the thread.
The system is not allowing me to respond to it)

The more Google innovates, the better. Who would
argue against that? I don’t care about comparison
shopping engines losing traffic to Google if they
lost in a fair competition. Take the concrete example
of Google’s search in shopping verical – Google Product
Search (GPS). Don’t you think consumers would have
been better served if GPS competed on an equal footing
with other CSEs for a spot in the generic search
results? Instead Google inserted GPS into the generic
search listings in the name of offering ‘blended results’.
(BTW: Talking about transparency – this blending happened
without any labeling making clear these results are not ‘organic’
in the same way the other 10 organic links are ) The
result is traffic to competing CSEs automatically
dropped irrespective of the merits of GPS in relation
to its competition. Google recently admitted that its
‘free’ model for GPS is working against keeping the
product catalog clean. Most GPS users know this already.
The price on the lowest priced item is often incorrect.
You would think if a product has basic quality problems
like these, it would be exposed to the market forces
that can potentially penalize it. May be Google’s product
is better than the competition despite these quality issues.
But market forces (presumed to be simulated by Google’s
natural search algorithm) should be allowed to make that
determination – not Google’s money making machine.

No, I am not asking Google to stop innovating. All I am
saying is that it won’t be too long before Google stops
innovating unless we are very vigilant about Google abusing
its dominant position in generic search to suppress
competition in other verticals. Innovation thrives with
competition. Remove competition – it won’t be too long
before innovation dies.

http://www.facebook.com/jwhere John Kent Williams

Next Tag is what is wrong with the internet. They are the walmart of the internet…..they kill all small companies. Google should de-index any company that simply lists things from other real companies. PERIOD.